WHAT IS A SWOT ANALYSIS?

DESCRIPTION
A SWOT analysis is a tool, used in management and strategy formulation. It can help to identify the
Strengths, Weaknesses, Opportunities and Threats of a particular company.
Strengths and weaknesses are internal factors that create value or destroy value. They can include
assets, skills, or resources that a company has at its disposal, compared to its competitors. They can be
measured using internal assessments or external benchmarking.
Opportunities and threats are external factors that create value or destroy value. A company cannot
control them. But they emerge from either the competitive dynamics of the industry/market or from
demographic, economic, political, technical, social, legal or cultural factors (PEST).
Typical examples of factors in a SWOT Analysis diagram:

Strengths
Specialist marketing expertise
Exclusive access to natural resources
Patents
New, innovative product or service
Location of your business
Cost advantage through proprietary know-how
Quality processes and procedures
Strong brand or reputation

Opportunities
Developing market (China, the Internet)
Mergers, joint ventures or strategic alliances
Moving into new attractive market segments
A new international market
Loosening of regulations
Removal of international trade barriers
A market that is led by a weak competitor

Weaknesses
Lack of marketing expertise
Undifferentiated products and service (i.e. in relation to
your competitors)

Location of your company

Competitors have superior access to distribution channels

Poor quality of goods or services

Damaged reputation

Threats
A new competitor in your own home market
Price war
Competitor has a new, innovative substitute product or

service

New regulations
Increased trade barriers
A potential new taxation on your product or service

Any organization must try to create a fit with its external environment. The SWOT diagram is a very good
tool for analyzing the (internal) strengths and weaknesses of a corporation and the (external) opportunities
and threats. However, this analysis is just the first step. To really create the fit with the external
environment is often the most difficult work.
CONFRONTATION MATRIX
A tool to combine the internal factors with the external factors is the Confrontation Matrix.
Opportunities

Threats

Strengths

Offensive
make the most of these

Adjust
restore strengths

Weaknesses

Defensive
watch competition closely

Survive
turn around

Often in reality the two columns of the SWOT diagram are pointing in opposite directions. Strategists must
still deal with the paradox of creating alignment. This can be done via Outside-in strategy formulation
(market-driven strategy) or Inside-out strategy formulation (resource-driven).
Note: you can also apply a SWOT analysis to competitors, often providing interesting new perspectives.